As an MSP, contracts are crucial to the success of your business. They protect you from scope creep, ensure timely payments, and provide a clear understanding of expectations for both parties. However, creating and managing contracts can be overwhelming and time-consuming, taking you away from what you do best - serving your clients and growing your business. That's why we've created this comprehensive guide to help you navigate the ins and outs of contract creation and management. With our step-by-step approach, you'll learn how to create effective contracts that work for both you and your clients. From defining scope and deliverables to setting payment terms and renewal schedules, we cover it all.

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Whether you're a seasoned MSP or just starting, this guide will equip you with the knowledge and tools necessary to create effective contracts and manage them efficiently. 

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What are MSP Contracts? 

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Managed Service Provider (MSP) contracts are agreements between a managed service provider and their client. These contracts outline the services that the MSP will provide, the terms and conditions of the service, and the responsibilities of both parties. The main purpose of an MSP contract is to ensure that both parties understand their obligations and expectations and that the services provided by the MSP are clearly defined.

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MSP contracts typically cover a wide range of services, including but not limited to IT management, network and security monitoring, data backup and recovery, and help desk support. The contracts may also include provisions for service level agreements (SLAs), which define the level of service that the MSP will provide and the consequences if they fail to meet those standards. Moreover, MSP contracts are important for establishing the cost of services and the payment terms. The contracts may include a fixed price for the services provided, or they may be structured on a per-hour or per-user basis. The contract may also outline the payment terms, such as the frequency of invoicing and the due date for payment.

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Why Do MSPs Need Contracts? 

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Managed Service Providers (MSPs) need contracts to protect their businesses and ensure that their clients receive the services they expect. Contracts provide clarity and structure to the relationship between the MSP and their client, outlining the scope of work, pricing, and terms of service.

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Here are some of the key reasons why MSP contracts are important: 

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1. Clearly define the scope of work: Contracts help MSPs to define the scope of work and establish what services will be provided to the client. By clearly outlining what is included in the services, the MSP can avoid scope creep, which occurs when clients expect services that were not originally agreed upon.

2. Avoid disputes: Contracts set expectations for both parties and provide a framework for managing disagreements or disputes. By agreeing to terms in advance, both parties are less likely to encounter conflicts that could lead to litigation.

3. Ensure timely payment: Contracts establish payment terms and provide MSPs with recourse if clients fail to pay for services rendered. They also ensure that the client understands the payment structure and due dates, which can help to avoid payment disputes.

4. Mitigate liability: Contracts can help MSPs to limit their liability in case of errors, omissions, or other issues. They can also include indemnification clauses, which shift responsibility to the client for certain types of damages.

5. Enhance professionalism: Contracts demonstrate a professional approach to doing business and show that the MSP takes their responsibilities seriously. This can increase confidence and trust with clients, leading to better long-term relationships.

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What are the Types of MSP contracts? 

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Managed Service Providers (MSPs) offer a variety of services to their clients, which can be covered under different types of contracts. Here are some of the most common types of MSP contracts:

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1. Service Level Agreement (SLA)

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A Service Level Agreement (SLA) is a vital part of any MSP-client relationship. It sets clear expectations between the MSP and the client on the level of service to be provided. An MSP Service Level Agreement Template outlines the specific services to be provided, the expected response times, and the consequences if the MSP fails to meet the agreed-upon service levels. It defines the priority levels of submitted support requests, with minimum response times and minimum time to resolution values.

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For example, an MSP might contractually agree to a minimum response time of one hour for a server outage that impacts key business operations, with an expected resolution time of eight hours. This ensures that the client's business is not adversely affected due to downtime or other issues, and the MSP can provide the necessary support to maintain the client's systems.

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2. Statement Of Work (SOW)

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A Statement of Work (SOW) is a contract that outlines the specific work to be performed by an MSP for a particular project. It is typically used for one-time projects, such as software upgrades or network installations. An SOW clearly documents the items included in its particular service offering, deliverable, or implementation, including SLAs, minimum requirements, and exclusions.

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Used in conjunction with a Master Services Agreement (MSA) for a first-time client onboarding & engagement, additional managed services statement of work are used to sell new or modify existing services during the lifetime of a client relationship. For example, for the first service sold to a client, they will countersign the MSA and an SOW for that service. For additional services sold or additions or modifications to the original SOW, the client will simply countersign additional SOWs. Using an SOW helps to ensure that both parties understand the specific deliverables and timelines for the project and that there are no misunderstandings or disputes regarding the scope of work to be performed.

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3. Master Service Agreement (MSA)

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A Master Service Agreement (MSA) is a contract that establishes the overall terms and conditions of the relationship between an MSP and its client. It outlines the general scope of services, pricing, and payment terms, as well as any other important considerations, such as liability and confidentiality. An MSA is often used for long-term, ongoing relationships between an MSP and their client.

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An MSP MSA is typically designed on a case-by-case basis, and there is no ultimate guide for all industries and states. It defines the obligations of two parties – the MSP and the client. An MSA typically does not go into too many details, like exact pricing or the scope of services. The additional documents, such as the SOW and SLA, should cover that. The MSA identifies the general obligations and liabilities of the parties. When designing an MSA, it is essential to consider that it should protect the MSP from accusations of gross negligence. The MSA also helps to establish a solid foundation for a long-term, mutually beneficial relationship between the MSP and their client.

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What Should MSP Contracts Include? 

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When creating a managed services provider (MSP) contract management, it's essential to include certain key components to ensure both parties understand their rights and obligations. Here are some key points to consider:

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1. Parties involved: Clearly identify all parties involved in the agreement, including the client, MSP, and any third-party vendors. Outline the relationship with each vendor in detail.

2. Services provided: Define the services the MSP will provide and what devices they will cover. Also, specify what services and devices are not covered and what the client is expected to provide.

3. Location of services: Specify whether the services provided are remote or on-site, and include the hourly rate for any on-site work. Additionally, outline what client locations are included, including employees who work from home.

4. Timing: Define your standard operating hours, holidays, and service level agreements (SLAs) for response time and resolution. Specify if there are any additional fees for after-hours services. Indicate the duration of the contract and how it can be terminated.

5. Procedures: Outline the process for clients to submit a service request and how they can escalate an issue. Also, specify how clients are expected to pay for services and the frequency of payment.

6. Confidentiality: Because MSPs have access to client data, it's crucial to assure clients that you will provide reasonable confidentiality regarding their data and business practices.

7. Non-Hire: Protect yourself from customers engaging your employees directly by warning them not to do so and specify the financial recompense for yourself if they do.

8. Liability: Include wording that covers warranties, disclaimers, indemnification, remedies, and other aspects of liability. It is best to consult an attorney to ensure proper coverage.

9. General Provisions: This section is critical to the enforcement and effectiveness of the contract. It can also be specific to your situation, so consulting an attorney is recommended.

10. Signing Process: Make sure that the contract includes an easy way for the client to sign it. Sending a document for the client to download, sign, and scan back can be a cumbersome process that may delay the contract's execution. Consider using electronic signature software, such as Zomentum, that allows clients to sign the document electronically from anywhere and on any device. This will help streamline the process and improve the overall customer experience.

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By including these key points in your MSP contract, you can help ensure that both parties understand their rights and obligations and avoid misunderstandings or disputes down the road.

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What is the Duration of MSP Contracts? 

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MSP contracts can vary in duration, depending on the needs of both the MSP and the client. Typically, MSP contracts fall into two main categories: short-term and long-term contracts. Short-term contracts typically last for one year or less, and they are typically used for specific projects or temporary needs. For example, a client might need an MSP to help with a software migration project that is expected to take six months. In this case, a short-term contract would be ideal.

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Long-term contracts, on the other hand, are typically multi-year agreements between the MSP and the client. These contracts are often used when the client requires ongoing IT support and maintenance services. The length of a long-term contract can vary depending on the client's needs and the MSP's capacity to deliver services. It's worth noting that some MSPs offer both short-term and long-term contracts to clients, giving them the flexibility to choose the option that best fits their needs. Additionally, some MSPs may offer discounts or other incentives for clients who sign long-term contracts.

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Ultimately, the duration of an MSP contract will depend on a variety of factors, including the needs of the client, the services provided by the MSP, and the capacity of the MSP to deliver those services over an extended period of time. It's important for both parties to carefully consider their needs and expectations before signing a contract to ensure that it meets their needs and provides a solid foundation for a successful partnership.

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How Often Should You Revise Your MSP Contract? 

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As an MSP, it is important to periodically review and update your contract with your clients, as well as any agreements with vendors or SaaS providers. The frequency of these revisions will depend on your business needs and the services you offer. A good rule of thumb is to conduct a yearly review of your documentation, focusing on clauses that may create problems or do not benefit your business relationships. If your contract has fallen behind in terms of service offerings, contract language, or payment terms, it may be time to update it.

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It is also important to keep track of all your agreements with clients and vendors to avoid confusion and ensure that you are operating under the correct provisions. By reviewing and updating your contracts regularly, you can ensure that your business is protected and that you are providing the best possible services to your clients. For updating your MSP contract, consider including online contract templates and opt for legal advice from an attorney who specializes in MSP contracts. By staying up to date with changes in the industry and your business needs, you can ensure that your contracts are effective and provide maximum protection for your business.

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How to Manage All Your MSP Contracts With Zomentum?

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Managing multiple contracts can be a daunting task for MSPs. Keeping track of all the different terms and conditions, payment schedules, and renewal dates can quickly become overwhelming. But with the right tools, managing contracts can be a breeze.

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That's where Zomentum comes in. Our contract management feature is specifically designed to make it easy for MSPs to manage all their contracts in one place. With Zomentum, you can view all your contracts, track important dates, and receive alerts when it's time for renewals or payments. No more sifting through piles of paperwork or searching through endless email threads to find the information you need. Zomentum keeps all your contracts organized and accessible, so you can focus on growing your business and serving your clients.

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Plus, with our user-friendly interface, you don't need to be a tech wizard to manage your contracts effectively. Our platform is easy to use, and our support team is always available to answer any questions you may have. So if you're tired of struggling to manage multiple contracts and want to simplify your workflow, give Zomentum a try. Our contract management feature is just one of the many tools we offer to help MSPs streamline their business operations and succeed in the marketplace.

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Conclusion 

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Creating and managing contracts as your MSP grows can be tough. From the timely creation of new contracts to keeping them updated and following up on changes, it can feel like a never-ending task that takes away from your focus on growth. However, there is a solution that can streamline your contract management process and allow you to prioritize your MSP business growth.

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Zomentum is the ultimate tool for MSPs looking to take their business to the next level. With Zomentum, you can easily create, manage and store all your contracts in one place, making contract management a breeze. This means you can focus on what really matters – building relationships with your clients, growing your business, and achieving success. Don't let the hassle of contract management hold you back. Sign up for Zomentum today and experience the power of streamlined contract management for yourself.

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